Deducting Charitable Contributions
Charitable contributions are deductible only if you itemize deductions on your Form 1040.
To be deductible, you must make charitable contributions to a qualified organization. Payments to individuals are never deductible. To check to see if an organization is qualified, check here: https://www.irs.gov/charities-non-profits/exempt-organizations-select-check
You can deduct only the amount that exceeds the fair market value of any benefit you received for your gift. Bidding $50 at a silent auction for a night’s stay at a hotel for a room that the hotel routinely rents for $75 does not generate a tax deduction.
Special rules apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value.
For a contribution of cash, check or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the amount, and the date of the contribution. In addition to deducting your cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations.
Deduct Whatever They’ll Allow
The IRS is very liberal in what can be deducted as a charitable contribution. If you can sell it at a garage sale you can probably deduct it on your tax return.
You are allowed to claim whatever you can prove through receipts, cancelled checks, appraisal, or other estimate of fair market value. There is no amount that the IRS simply allows without question. You must be able to substantiate each and every donation.
To determine the value of your donated treasures, you can consult with the valuations guides provided by the Salvation Army (https://satruck.org/Home/DonationValueGuide) and Good Will (https://goodwillnne.org/donate/donation-value-guide/). There are also some commercial databases available. Try searching for the term “how to determine value of donated items for tax purposes.”
Most people are surprised to learn the value of their donated items. The deduction ends up being much larger than they originally anticipated.
The value of an item is determined and substantiated by the donor, not the receiving entity or tax preparer. Providing a blank donation receipt to your tax preparer will generate no tax deduction.
What Records Should I Keep
If you are audited and the examiner chooses to question charitable contributions, the following items are helpful:
- A receipt from the organization that accepted the donation (Required for non-cash donations)
- A receipt for purchase (no one expects you to keep the receipt for a 10-year-old coffee maker)
- Cancelled checks, credit card statements, bills of sale, appraisals, etc.
- Pictures of the items
How do I document It
Having a garage sale? At the end of the event move all the items together and take a photo. Write down a list of what is being donated and determine its value using any of the previous recommendations. Take it to the drop off location and obtain a dated receipt. Staple that receipt to the list along with the photo.
Limits On Deductions
There is no overall limit on deductions. There is an annual limit based on your income and the type of items donated. See IRS Publication 526 (https://www.irs.gov/pub/irs-pdf/p526.pdf)
Some items can be deducted up to 50% of your income, others 30% of income. If your deductions exceed these limits they are carried forward to a subsequent year until used up.
Inheriting a house full of furniture and stock from a relative that is all subsequently donated to charity may take more than one year to claim, but you can eventually deduct it all.
Some Unusual Deductions
- Donations of left over paint and building supplies to organizations such as Habitat for Humanity.
- You may be able to deduct some expense of a student living with you such as a foreign exchange student.
- The cost of a required vest or uniform to be worn while performing volunteer work.
- The cost of travel to a convention. If your travel to represent a qualified organization at a convention, the cost of airfare, auto, taxis, bus, train, hotel and meals.
- Certain Foster Parent expenses are deductible.
The mileage driven on a vehicle you own for the purpose of performing a charitable duty is deductible along with tolls and parking.
What’s Not Deductible
- A contribution to a specific individual
- A contribution to a non-qualified organization
- The value of your time, or services
- Recreational expenses while traveling to represent a qualifying organization
- Restricted donations, or the partial interest in an object may have a limited deduction.
- Dues to home owner’s associations
- Union dues (may be deductible as a business expense)
- Political organizations or candidates